Market Week Ahead: Union Budget, Economic Survey & earnings among 10 factors to keep investors busy

For the upcoming week, the big bang event will be the Union Budget, followed by earnings as well as the auto sales figures. Among global cues, US Fed meet as well as domestic and global data could dominate the Street as well.

The benchmark indices lost ground for the first time in last seven consecutive sessions, with the Sensex falling more than 100 points on Thursday but the Nifty ended the January series with 6 percent gains.

Profit booking in technology, auto, pharma stocks, and PSU banks after the announcement of recapitalisation amount for current fiscal pushed the market lower. However, gains in private banks, metals and infra stocks capped losses.

A sharp rise in oil prices and weak Asian cues due to losses in the US dollar dampened the market sentiment. Also, there was an increase in volatility during the day as traders rolled over their positions to the February series.

The 50-share NSE Nifty managed to hold 11,000-mark amid selling pressure throughout the session, before closing lower 16.30 points at 11,069.70.

In January series, the Nifty rallied 5.65 percent and the Sensex rose 6.5 percent while for the week, frontline indices gained more than 1.5 percent.

"Before Budget announcement on February 1, we can see a further short covering, which can take the Nifty higher towards 11,200. In case of no negative surprise, the Nifty would continue to form a base near 11,000. This uptrend should continue," ICICIdirect said.

For the upcoming week, the big bang event will be the Union Budget, followed by earnings as well as the auto sales figures. Among global cues, US Fed meet as well as domestic and global data could dominate the Street as well.

The Union Budget & Economic Survey

This is the biggest event for the markets and economy, in general. The government will be presenting the Union Budget 2018 for the next financial year next week.

It assumes significance as it is seen as the last full-fledged Budget in this tenure of Narendra Modi-led BJP government. The Street will watch out for cues from the event, whether populist or reforms-oriented and could see some reactions on that day.

The Budget Session will begin on January 29, 2018, and will end on February 9. The commencement will also see the tabling of Economic Survey. Meanwhile, presentation of the Union Budget by Finance Minister Arun Jaitley will take place on February 1. A second part of the Budget Session will be held from March 5 to April 6, 2018.

Q3 earnings of 465 BSE companies

Along with the Union Budget, there are several major companies that will be declaring their results for December quarter between January 28, 2018 and February 2, 2018.

Companies such as Divi’s Laboratories, Persistent Systems, Century Textiles, Emami, Wockhardt, ICICI Bank, Larsen and Toubro, Oriental Bank of Commerce, IDBI Bank and JSW Steel, among others, will be declaring their results.

Two major index heavyweights will be declaring their results on Monday — Tech Mahindra and HDFC.

The IT services firm is expected to report a profit after tax (PAT) of Rs 775 crore against Rs 836 crore during the previous quarter, a poll of analysts by CNBC-TV18 showed.

Meanwhile, the dollar revenue could rise 2 percent at Rs 1,200 crore against Rs 1,179 crore, while the rupee revenue could rise to Rs 7,760 crore. The company may also report a constant currency growth of 1.8 percent, lower than 2.3 percent in the previous quarter.

Meanwhile, Housing Development Finance Corporation (HDFC) may report a jump in its Q3 net profit of Rs 4,949.1 crore against Rs 1,701.2 crore, according to a poll of analysts by CNBC-TV18 showed. The jump of 190.9 percent is likely to be on the back of post-tax income of Rs 3,675 crore from stake sale in HDFC Life.

IPO

With an intention to raise around Rs 937 crore from its initial public offering (IPO) in its second attempt, Galaxy Surfactants is set to open the issue on January 29, 2018.

MUST READ | Galaxy Surfactants IPO to open on Jan 29: 10 things you should know

The price band for the issue has been set at Rs 1,470-1,480 per share.

The company plans an IPO of up to 6,331,674 equity shares of face value of Rs 10 each for cash.

ICICI Securities, Edelweiss Financial Services and JM Financial Institutional Securities will manage the company’s public issue. The company's equity shares are proposed to be listed on BSE and NSE.

Corporate Action

The Street will watch for a few stocks that will be in focus due to Board-related developments.

For instance, the Boards of Tata Steel and Piramal Enterprises will be meeting on January 31, 2018 for a rights issue. Moreover, companies such as Gayatri Projects, Sundaram Finance, IRB Invit, and eClerx will be in news for a scheme of arrangement as well as a buyback issue. Additionally, the Boards of companies such as HCL Tech, Bharti Airtel, Wipro, JM Financial, and Indiabulls Housing will be meeting to discuss their interim dividend.

Global Cues

The Street will also monitor any developments from the US, where the Federal Reserve will be holding its two-day monetary policy meeting. For now, investors could have factored in a ‘no rate hike’ scenario as it had recently raised it during the December meeting. Having said that, the Fed’s comments and outlook will be watched for cues.

Additionally, moves on the dollar will also be watched. The dollar index has been in a year-long decline, defying forecasts that it should strengthen from the fact that the Federal Reserve is raising interest rates and normalizing monetary policy faster than its counterparts, CNBC reported. But the opposite has happened, and the dollar weakened as flows increased into the euro and yen, as those economies improved, and central bankers in Europe and Japan look closer to removing their own heavy-handed accommodation.

Stocks in Focus

Apart from earnings scenario, a few stocks could be in focus on the back of corporate developments.

Maruti Suzuki Q3 profit up 3 percent; revenue, operational nos in line; cuts royalty payment

Indoco Remedies: The firm's Unit 1 in Goa inspected by USFDA in Jan 2018 received 8 observations

Avenue Supermarts Q3 net profit soars 66 percent to Rs 251.8 crore; revenues rise 23 percent.

LIC Housing Finance: The company’s Q3 net profit has fallen around 2 percent at Rs 491 crore.

JSPL: Net loss for Q3 trimmed to Rs 272.7 crore against Rs 453.3 crore year on year.

Macro Data

Among macro data in India, the annual GDP figures will be out next week along with as well as purchasing managers’ index (PMI) data.

On the global front, Japan will be releasing its industrial production data, along with Europe that will be declaring CPI expectations, among others. The US too will be declaring its employment data, which will be a metric to measure jobs scenario there.

Technical Factors

Bulls failed to keep the momentum going as Nifty50 snapped its 6-day winning streak on Thursday and made a ‘Hanging Man’ kind of pattern on the daily charts.

The index took support at its crucial 5-day’s exponential moving average (DEMA) before bouncing back. The index closed above 11,000 for the third day in a row.

A Hanging Man is a bearish reversal candlestick pattern which is usually formed at the end of an uptrend or at the top. In a perfect 'Hanging Man' pattern either there will be a small upper shadow or no upper shadow at all, a small body and long lower shadow.

“The near-term trend of Nifty as per smaller and larger timeframe is up and still there is no confirmation of any reversal pattern at the highs. Next important resistance to be watched is around 11,115 and 11,300 levels, which are 1.382 percent and 1.618 percent Fibonacci projections,” HDFC Securities said in a report.

It also said that Budget could lead the market for next week, but a top reversal is likely in the next 1-2 weeks. “The confirmation of top reversal pattern from the highs is likely to set the significance of reversal and quantum of expected weakness in Nifty the next couple of weeks,” the report added.

FII Data

The Street will watch out for cues from foreign institutional investors (FIIs). Interestingly, after five consecutive months of being net sellers, they have been net buyers for this month, buying around Rs 9,518 crore worth of shares so far this month.

Meanwhile, domestic investors have been net sellers of Rs 700 crore worth of shares.

Experts have earlier hinted how domestic liquidity has been driving the market ahead. With FIIs joining the party, they had also hinted at further highs on the market.

Oil movement

Crude oil prices touched USD 71 per barrel mark earlier this week, which, in some ways affected the market here. The trajectory of crude movement could likely impact the economy in India going forward, which in turn could affect the market as well.

Oil prices were firmer on Friday after hitting fresh three-year highs in the previous session, as weakness in the dollar continued to underpin prices with crude on track for a weekly gain.

"One has to question if this rally is sustainable. Downside protection is going to be warranted," said Brian LaRose, technical analyst at United-ICAP. Additionally, several experts have also spoken about demand getting reduced as well, which could possibly bring down these prices as well.

Auto sales

The new month will also signal auto sales figures for the month of January. Investors in auto stocks are on their feet, with the Nifty auto index falling over 1 percent. All major stocks have ended in the red, with auto ancillaries falling the most.

MORE WILL UPDATE SOON!!

Nifty likely to open with gap-up on Monday; likely to touch 11200-11300 ahead of Budget

The index is likely to hold the ground on the higher side till Budget unfolds and Nifty is likely to scale up towards 11200-11300 in the pre-budget rally.

  

The market witnessed a lot of action on the largecap front especially in IT, Banking and Metal sector which led Nifty to scale up above 11,000 and Sensex above 36,000 level.

Quarterly earnings growth is also on expected line which is giving comfort to the bulls.  The market looks little nervous ahead of the Budget especially on LTCG front and fiscal consolidation roadmap.

Most of the midcap stocks have witnessed profit booking and midcap index has corrected significantly ahead of the Budget.

We feel that the index is likely to hold the ground on the higher side till Budget unfolds and Nifty is likely to scale up towards 11200-11300 in the pre-budget rally.

Note: SGX Nifty closed 63 points higher at 11,137.

One should look to buy the stocks from the sectors which have shown a lot of expectation buildup for the forthcoming budget.

Sectors which are bullish on their long-term charts and have witnessed outperformance viz., sectors like Cement, Infrastructure, FMCG, and Automobiles are likely to exhibit bullishness ahead of budget as the near/short term charts are sustaining above breakout levels.

 Weekly and Monthly charts look positive and are forming a higher top, higher bottom formation indicating sustained uptrend. Weekly and monthly strength indicators are in positive territory, signifying sustained strength ahead.

Weekly chart pattern suggests that Nifty is likely to continue its uptrend in the short term and it can move towards 11,250-11,400 levels. However, on the downside 11,000-10,800 is likely to act as good support if any corrective action happens in the near-term

 Top 3-5 stocks which are looking attractive at current levels based on technical?

A) Technically private banks, Metal, FMCG, Fertilizer and IT space looks attractive for near-term play. We like HDFC Bank, Kotak Bank, VEDL, TATA Steel, ITC, HCL Tech, TechM, NIIT Tech from the above-mentioned space.

Escorts: CMP Rs 836.8| Target Rs 905| Stop Loss Rs 790| Time 8-15 days| Return 8%

Escorts is in up-trend across all the time frames forming higher top - higher bottom formation. Since June 2017, the stock was in major consolidation mode within Rs820-590 band on the weekly chart.

It gave breakout at Rs820 levels and is sustaining above the same. On the daily chart, the stock has given a breakout of up sloping trend line at Rs825 levels.

The stock is also sustaining above its 20, 50 and 100 and SMA which supports bullish sentiments ahead. Both weekly and monthly strength indicator such as RSI along with the momentum indicator Stochastic are in bullish territory.

Both are sustaining above their reference lines which signals strength and upward momentum in price. Thus, taking into consideration the above factors, the maximum upside can be expected to 890-905.

Vedanta Ltd: CMP Rs 345.4| Target Rs 370-376| Stop Loss Rs 325| Time 8-15 days| Return 9%

The most prominent observation on the price chart of Vedanta is that the entire consolidation underway since November 2017 till date has formed a Cup and Handle formation.

The breakout of this formation is witnessed at 345 levels on the daily chart. The stock is sustaining above its 20, 50, 100 & 200 day SMA which supports bullish sentiments ahead.

On the volumes front, the stock has witnessed a significant rise in breakout level indicating increased participation on the rally.

Both weekly & monthly strength indicator RSI is in bullish territory and sustaining above their reference lines which signals strength and upward momentum in price. Thus, taking into consideration the above factors, the maximum upside can be expected to 370-376.

Sudarshan Chemical Industries Ltd: CMP Rs 465.4| Target Rs 490-500| Stop Loss Rs 530| Time 8-15 days| Return 7.5%

The most prominent observation on the price chart of Sudarshan Chemical Industries is that the entire sideways consolidation underway since May 2017 till date has taken the shape of a "Horizontal Channel" continuation pattern formation.

The breakout of the "Horizontal Channel" continuation pattern formation was witnessed at 430 levels. The measuring implication of the price pattern i.e. the range of the consolidation (430-360 = 70 points) projected from the breakout level of 430 provides upside target of 490-500 approximately.

Stocks is sustaining above its 20, 50, 100 & 200 day EMA which supports bullish sentiments ahead. The stock is moving in higher Top higher Bottom formation across all the time frame indicating sustained uptrend. Volumes are significantly rising around breakout level.

Adani Ports: CMP Rs 436| Target Rs 460-470| Stop Loss Rs 418| Time 8-15 days| Return 7.8%

The stock has witnessed the breakout of symmetrical triangle pattern breakout on weekly chart at427 level. The stock was consolidating in range of 380-425 range since last three months.

The breakout of the Triangle pattern suggests stock can move towards 460-470 level in the short term. The stock is sustaining above all its important moving averages which support bullish sentiment ahead.

The weekly and the daily strength indicators are in positive territory which indicates the bullish trend to continue in short term.

MORE WILL UPDATE SOON!!

Budget 2018: Union Budget to keep market volatile; 3 stocks which can give up to 24% return

Here is a list of stocks which can give up to 24% return in 15-21 sessions:

  

During the last week, the benchmark indices hit another milestone as Nifty & Sensex registered a fresh all-time high of 11,110.10 & 36,268.19 levels respectively in Wednesday’s trading session.

However, in Thursday's session, traders decided to take some money off the table on the back of F&O expiry and the crucial event i.e. Union Budget.

Looking at the overall chart structure, Nifty had confirmed its breakout from a Rising Channel formation and resultant indices saw a sharp rally in past few weeks.

Now, the weekly RSI (14) has signaled medium term bearish divergence. Also, the 161.8% price extension of its entire move from the bottom of 850 to the top of 6357 which added to the bottom of 2253 comes near 11163.

The Brent Crude Oil crossed 70 marks and the Bond yield has started inching higher. In such scenarios, we advise traders to stay light with the position as the volatility likely to increase ahead of Union Budget.

On the index front, 10900 will act as an immediate support and any move below this level will pull index further lower towards 10780 / 10665 levels respectively.

Here is a list of stocks which can give up to 24% return in 15-21 sessions:

LIC Housing Finance: Buy at CMP 559| Target Rs627| Stop loss Rs535| Timeframe 15 to 21 sessions| Return 12%

Looking at the daily chart, the stock has formed a strong base near 540 – 535 zone and due to recent consolidation stock formed inverse head & shoulder pattern on daily chart.

The daily RSI (14) has signaled a probable range shift. Hence, we recommend traders to buy this stock at current level off Rs565 with a price target of Rs627. A Stop loss should be placed at Rs535 on a daily closing basis.

Motherson Sumi Systems Ltd: Sell around Rs370 – 375| Target Rs340| Stop loss Rs389| Time frame 15 to 21 trading sessions| Return 8%

Looking at the daily chart, the stock has been in a long-protracted uptrend since past several months and in that optimism, the stock hit a fresh all-time high of around Rs396.

Subsequently, stock saw mild profit booking which was followed by consolidation. As a result, the stock is forming a triangle pattern. The daily RSI (14) is struggling to cross 60 levels which doesn’t bode well for bulls.

Also, we are observing three-point bearish divergences on the weekly chart. Hence, we advocate traders to go short in this stock around Rs370-375 with a price target of Rs340 and a stop loss placed above Rs389.

Suven Life Sciences: Buy above Rs223| Target Rs268| Stop loss Rs196| Time frame 15 to 21 trading session| Return 24%

Looking at the weekly chart, the stock has confirmed its breakout from downward sloping trend line during mid-October 2017 which triggered a fresh buying interest.

In that optimism, the stock rallied towards 230. Subsequently, stock witnessed profit booking which led to gradual correction followed by consolidation.

Now, the daily chart has formed a Bullish Cup & handle pattern and the formation of handle formation is in process. The said pattern will be confirmed once stock breaches the Rs223 levels.

In that case, we expect an acceleration of bullish momentum and stock likely to rally towards Rs 268. A stop loss should be placed below Rs 196.

MORE WILL UPDATE SOON!!

Budget 2018: Short coverings ahead of the Budget could push Nifty towards 11,200

In case of no negative surprise, Nifty would continue to form base near 11,000 and this uptrend should continue. However, there has been some weakness seen in the midcap space which is not visible looking at the Nifty prices.

The Nifty has started closing above 11,000 levels amid some volatility. Before Budget announcement on February 1, we can see further short covering which can take Nifty higher towards 11,200.

In case of no negative surprise, Nifty would continue to form base near 11,000 and this uptrend should continue. However, there has been some weakness seen in the midcap space which is not visible looking at the Nifty prices.

The reason being the market participants were quite overboard on the midcaps instead of largecap stocks. This is where profit booking is quite visible in this space before the major Budget announcement.

The support from private banking and other non-banking heavyweights is continued. The first leg of profit booking was seen in IT heavyweights after continuous move in January series. These stocks are expected to pick up momentum back after a while.

The volatility has risen before the event. This is the same pattern what was seen before the last budget announcement in 2017.

After the Budget in 2017, volatility had cooled-off quite sharply from 17 percent to 12 percent within few sessions. We believe the same decline may be seen this time around in absence any major event after this.

The roll spread in Nifty turned negative from 25 points on the expiry day which shows rollover of short positions in the index. Sustainability of Nifty above 11000 post-budget should lead to short covering in the index.

Nifty Bank:

After re-writing history books, the Bank Nifty index ended at a new life high by moving above 27000 levels in the January series with broad-based participation in private as well as public sector banks.

Participants booked marginal profits in PSU stocks after the government moves to infuse more Capital.

The intraday volatility can be high ahead of the Union Budget 2018 and sharp intraday whipsaws can be seen going ahead as the volatility index has seen its sharpest up-move in the last few months and rose to 18 percent from 11 percent.

Rollovers were in line with the expectations and the short rolls is also seen for the February series. We feel in case of any major fall, this short positions will be covered which will further provide a cushion to the index and in absence of any negativity from the budget, we feel the index is likely to witness support near 26900 levels.

The current price ratio (BankNifty/Nifty) is near 2.47 levels. We feel the ratio is likely to move towards 2.52 levels on the back of outperformance in banking stocks whereas, on the lower side, support for the same can be seen near 2.43 levels.

Risk-on sentiment continues to drive FIIs inflows:

Melt up in equities continues unabated with MSCI world Index up 7 percent in 2018 (1.5 percent in a current week) and MSCI EM Index up 9 percent in 2018 (2 percent in a current week).

Money flow has strongly supplemented this flow as bond markets continue to grapple with higher bond yields and the bulk of incremental fund flows are seen in equity segment and that holds true for emerging markets as well.

YTD inflows in Indian equities have aggregated close to the US $ 1.6 billion already (1.1 billion in last 5 days) and other EM-like Taiwan & South Korea also has seen inflows of US $ 2.5 billion each.

In the F&O segment as well, there was bullish stance by FIIs, as they bought Index Futures worth over the US $ 100 million and Stock futures worth in the US $ 750 million.

Despite India VIX moving to 18 levels, there was option selling worth over the US $ 850 million, suggesting a bet on a strong January series expiry).

Rise in yields in the bond market has still not made inroads into long-dated part of the curve (e.g. US 30Yr) (where major bond portfolio lies) and hence the weak dollar story continues to ramp up strong EM FX and resultant strong EM equities.

This trade is strongly anchored into Dollar weakness and as long there is no swift and sharp reversal to dollar strength, the EM risk-on rally will continue to have a strong tailwind.

However, the key risk for the equity segment remains the sharp up move in 2018 already (the current rally has the strongest start to any year in a long time frame) and some profit taking around current levels.

MORE WILL UPDATE SOON!!